On a recovery and its pitfalls

By early this spring, it is very possible [the stock market] will have entered into a leg of advance which could dwarf 1982's historic August-October run. In this same vein, there has been no alteration as to the leadership sectors of the market. Leaders will continue to be blue chip, high technology, natural resource, and pharmaceutical/health-care-oriented stocks. The high technology sector, which takes in a wide array of companies in many industries, should continue to be in the dominant force. We recommend investors maintain positions. Avoid the temptation to sell into rallies at present. --Wedbush, Noble, Cooke Inc., Los Angeles

The economy is sending out increasingly convincing evidence that the trough in economic activity took place in the fourth quarter of 1982, most likely in November. The adjustment to a more stimulative monetary posture began in May of last year with more aggressive reserve injections by the Fed. Accelerating monetary growth followed with the normal two-to-three-month lag, and by December the 6-month growth rate for M1 [money supply category] had risen to a near-record 12.4 percent. Coincident with the expansion of monetary growth was a major reduction in interest rates. Bear, Stearns & Co., New York

The US steel industry's problems are deep rooted. The steel producers' solution - import barriers - can no doubt stem the tide in the short run . . . . However, because steel is a major input in other industries, restricting steel imports would inevitably raise steel prices, thus adversely affecting the competitiveness of other US industries. . . .the wisdom of such a policy is questionable from the viewpoint of the economy as a whole. --Federal Reserve Bank of San Francisco